Shanghai Factory Closures Bring Unexpected Shock to Supply Chains

As Shanghai factory closures continue to disrupt supply chains in China and around the world, shippers are experiencing growing pressure to prepare for shocks further down to the supply chain. Preparation begins with strengthening the agility and visibility of transportation management systems. Digital automation and data-centric supply chain transformation can increase visibility and mitigate the risks of shocks to the supply chain.

Shanghai factory closures 

Shanghai factory closures continue.  Last spring, production was halted at Shanghai factories, including two run by Apple, Inc because of extended Covid-19 lockdowns in the region. The summer Shanghai factory closures are the result of the hottest, driest summer in years, causing ongoing problems with low water at hydroelectric dams. Many factories, especially those that make processor chips and other industrial products have shut down to conserve power for air conditioning homes. 

The good news is that the recent Shanghai factory closures only make up a small percentage of China’s industrial capacity. Nonetheless, the closures should still be ringing an alarm for supply chain managers everywhere. That’s because these shocks to the supply chain aren’t due to Covid-19. The hottest summer on record caused water levels to decrease, and industrial regions that rely on hydroelectric power will face these challenges as long as the earth keeps getting warmer. 

As climate-caused shocks to the supply chain are likely to continue, shippers must continue to prioritize resiliency. Shippers can bolster their resilience by stockpiling supplies, improving safety conditions for workers, and preparing for climate events. They can also explore more agile and visible systems.

Strengthening supply chain agility

By prioritizing solutions that provide a global view of operations, shippers can help supply chain managers get prepared to take quick action. Agile supply chains utilize production algorithms and automation to respond to short periods of high volume and long periods of low volume. This function primarily adapts to demand, but it also mitigates risk on the supply. 

Agile models prioritize access to a wide range of suppliers, which is essential in a world where factories are especially vulnerable to continuous and unexpected shutdowns. A combined expansion and localization of carrier networks can help shippers adapt to potential shutdowns. When shippers cultivate long-term relationships with local carriers, they can be more prepared for shocks to the supply chain on a global scale.

Supply chain end-to-end visibility 

Processes must be visible for a large supplier and carrier network to be effective. Agile supply chains virtually integrate processes to strengthen the visibility of carrier networks, which is best achieved with a robust TMS. 

CTSI-Global’s HoneyBee TMS™ offers a load optimization tool that promotes route optimization, order aggregation, and real-time tracking. The Honeybee TMSTM also provides tools for carrier communication, providing continuous access to over 20,000 shippers. A transportation management system with access to many carrier options is a key component in strengthening visibility. With carrier selection features, shippers can act fast and easily adapt. 

The recent Shanghai factory closures are just one of many shocks to the supply chain that challenge shippers. Supply chains are more vulnerable to disruptions than ever before. As with all supply obstacles, the response must be resilient.

Prepare for shocks to the supply chain before they happen. Contact CTSI-Global to discuss how to bolster the visibility and agility of your TMS.